Outlook for the Nikkei average this week [26 April 2026]

 [Fundamental viewpoint]

In the U.S. markets last week, while the outcome of negotiations between the U.S. and Iran to end hostilities remained uncertain, AI and semiconductor-related stocks performed well, and stock indices posted mixed results for the week.

Weekly percentage change: Dow Jones: -0.44%, NASDAQ: +1.50%, S&P 500: +0.55%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns over military conflict in the Middle East and the prolonged Ukraine conflict, financial instability and worries about a global economic slowdown stemming from the U.S. administration's tariff policies and rising interest rates, as well as fears of a real estate bubble bursting and China's economic slowdown. Consequently, there are also concerns about the arrival of stagflation. Furthermore, continued attention is required regarding geopolitical risks in Latin America and East Asia.

The difference in the yield spread between the Japanese and U.S. markets is 0.62 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2026 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 21.7 and the Nikkei 225's P/E ratio of 20.7 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2026 relative to the current price of the Nikkei 225 will be 0.62 points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 23.7 Or, the Nikkei 225 will be around 68,560 yen.

As a result, the Japanese market is undervalued by about 8,840 yen in the medium to long term.

From a fundamental perspective, one could say that the Japanese market is about 8,830 yen less attractive than the U.S. market. Last week, the weakness in the Japanese market intensified.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2026 GDP estimate (now +2.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is above the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was positive. The daily is a above the 200-day line and the clouds on the Ichimoku Chart. This week, the focus will be on whether the NYDow can keep above the 25-day line.

②    Following the release of earnings results, the projected ROE for Nikkei 225 constituent stocks stood at +8.9%. This is unchanged from three months ago. The projected profit growth rate was -1.5%, an improvement of 1.6 percentage points compared to three months ago.

③    Long-term U.S. interest rates rose, widening the interest rate differential between Japan and the U.S. from 1.85 to 1.89, and the dollar-yen exchange rate moved toward a weaker yen, fluctuating between the 158 and 159 yen ranges. The Dollar Index rose by 0.29% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2026 is expected to be +3.2% for Japan and +4.7% for the U.S., so the Japanese market is 1.7 percentage points inferior in this aspect.

⑤    Net buying was recorded in the third week of April, and it is highly likely that net buying also occurred in the fourth week of April; net buying is expected this week. Last week, out of the five factors, factor ① was a bullish indicator.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is overvalued by 11.4 percentage points (equivalent to approximately ¥6,810 for the Nikkei 225) relative to the NASDAQ's 200-day moving average deviation rate on a medium-to-long-term basis. Meanwhile, it is overvalued by 16.6 percentage points (equivalent to approximately ¥9,910 for the Nikkei 225) relative to the NY Dow's 200-day moving average deviation rate on a medium-to-long-term basis.

 

The Japanese market is performing better than the Dow Jones and NASDAQ. The VIX, an indicator of volatility in the U.S. market, rose to 18.7 for the week. The Nikkei VI fell to 29.6 for the week. The U.S. market is in an “optimistic” state, while the Japanese market is in a “fearful” state.

 

The Nikkei Average is above the 9-day and 25-day moving averages. A “green light” is lit for the short-term trend.

The Nikkei Average is above the cloud in the Ichimoku Kinko Hyo chart. The overall deviation rate is +36.9%, and the deviation rate from the 200-day moving average is +16.6%. With three factors positive, a “green light” is lit for the medium-term trend.

 

In the US market, the NY Dow is above the 9-day line and 25-day and 200-day lines. It is above the clouds of the Ichimoku chart.

The NASDAQ is the above 9-day line and 25-day and 200-day lines. It is above the clouds the Ichimoku Chart.

It is a ‘green light’ in the short term and a ‘green light’ in the medium term.

 

[Outlook for this week]

In the U.S. market, concerns about an economic downturn driven by the prolonged conflict in the Middle East and high oil prices are likely to be the primary focus for the time being.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term up trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market indicates that the yen has shifted towards depreciation, with the low of 139 yen reached in April 2025 marking the bottom. This week, the yen is expected to trade between the 158 and 160 yen per dollar range.

 

In the U.S. markets this week, the possibility of an agreement between Iran and the U.S. will likely continue to influence trading. Additionally, major global companies such as Microsoft, Amazon, Apple, Alphabet, and Meta will release their earnings reports. Attention will focus on the latest views from major U.S. tech companies regarding the outlook for AI investments, which have been supporting global stock markets. Furthermore, the Federal Reserve, the ECB, the BoE, and the Bank of Japan are scheduled to announce their monetary policy decisions. In terms of economic indicators, first-quarter GDP figures for the U.S. and the Eurozone, the Eurozone inflation rate, and China’s PMI are scheduled for release.

 

Last week, the Nikkei Average traded within the expected range. The high was about 380 yen below the upper limit, and the low was about 470 yen above the lower limit.

This week, the Nikkei Average is expected to move within a range defined by the upper limit at the +2σ Bollinger Band (currently around 61,420 yen) and the lower limit at the +1σ Bollinger Band (currently 58,510 yen).

                           

This week, the Nikkei Average is likely to continue its upward trend, driven by AI and semiconductor-related stocks, and could even reach a new all-time high. If the ceasefire between the U.S. and Iran holds, the index is expected to continue trading between the +2σ and +1σ lines of the rising Bollinger Bands.